Singapore 2025

What of Singapore towards 2025? Thoughts of a Singaporean.

Parliament: Budget 2013 (Pritam Singh) – 6 March 2013

Mdm Speaker, my speech today is divided into two parts – the first assesses the Budget’s attempts to create a more inclusive Singapore with the second, focus on changes to our car ownership policy as a result of Budget announcement on the same.

Mdm Speaker, a simple “control F” of the Budget speech, and a search for the words “do more” reveal seven matches. According to the Budget, the Government will do more for retirees, Singaporeans who need help with their medical expenses, seniors so that they have a sense of economic security and fulfilment in their retirement years, and also for children in the pre-school and primary school levels.

The Government also wants to do more against rising inequality to tilt the balance in favour of the lower and middle income, and for older Singaporeans with enhancements in Workfare and CPF. The timing of these changes are significant, too – three years before the next General Elections with enough lead time for the proposals to take effect.

Be that as it may, the Government’s efforts to improve social mobility and reduce inequality are necessary steps, especially in view of how the global economy and, more importantly, forces beyond this Government’s control, are shaping up. Chiefly among which are inequality and economic insecurity.

For the longest time, the State discourse in Singapore has eschewed any reference to welfare. Similarly, the State has tended to place meritocracy on a pedestal. In fact, the political leadership has tended to frame both issues in the extreme with welfare representing the bad and meritocracy representing the good.

However, this Budget was noteworthy because meritocracy came with a caveat. The Deputy Prime Minister’s Budget Speech noted that that meritocracy alone will not assure Singaporeans of social mobility and that Government policies seek to level up children that come from poorer and less stable families. This is a significant statement as it appears to premonition a shift in the State discourse.

Equally noteworthy, the Budget Speech established that while overall healthcare expenditure will go up, Government policies envisage a reduction in Singaporeans’ out-of-pocket share of medical costs with the Government taking on a larger share. Whatever the reasons for these shifts to the left, they are in line with the long-held belief of the Workers’ Party and many Singaporeans that for a country with a per capita income of about US$45,000, the Government can do much more on the social front for Singaporeans.

Mdm Speaker, one subject covered in the Budget that affects many middle-class Singaporeans are changes to the Government’s policy on car ownership. The significance of the Budget and associated changes to the Government’s car ownership policy led the executive director of a leading car dealership to say, “In my 28 years in this trade, this is the most serious development I have seen.” An accounting partner of a Big Four firm was quoted as saying, “The Minister is riding through Singapore’s Sherwood Forest to tax the rich who own high-end properties and drive luxury cars.”

While I would not take it as far as the accounting partner did — as there is much more room for greater progressivity in our tax system — I am in favour of higher taxes paid by those who drive luxury vehicles. It was telling that as the Minister spoke about the tiered ARF for his Budget Speech, an MAS circular about a cap on loan-to-valuation (LTV) ratios also started making its rounds.

The circular established that the new loan quantum for a car with an OMV of less than $20,000 would be 60% of the car price, and 50% if the OMV was higher. Significantly, the maximum loan repayment is now only five years, from the 10 years previously.

On one level, the Finance Minister’s Budget Speech on tiered Additional Registration Fees (ARF) appeared to continue with the theme of progressive taxation, but the possible effects of the Budget announcement and the MAS circular taken together leads me to conclude the opposite: That the rich will benefit from the latest changes to our car ownership policy as the changes do not address the high disposal income of the rich.

In the context of the Budget Statement, it would have been helpful if the Minister had addressed the changes to the ARF with the policy intent of the MAS circular especially since the two are so inextricably linked. If these changes were implemented to force Singaporeans to use public transport, the system, as it stands, leaves much to be desired especially during peak hours. I am not sure what the effects of these latest changes to our car ownership policy will be, as there are differing views on the impact of the latest policy changes on COE prices and as a result the price of cars. But the effect of the new LTV ratios is likely to be most acutely felt by families with two or more children. Those with elderly family members or the disabled who need the mobility provided by a car but are unable to cough up the downpayments since the larger household size necessarily entails a lower disposal income set aside for the higher down payment required now.

There is also the tangential concern about the inability of larger families to purchase a vehicle which from a policy perspective may well indirectly stymie efforts to promote our TFR, since the lack of mobility for family, leisure, travel and support will well factor into a person’s decision to have fewer children and prejudice those who already have large families. It would be imperative for the Government to look at possible tweaks to the system if indeed larger families and families that include disabled Singaporeans or elderly parents are genuinely affected, as the effects of the new policy kicks in over the next few months.

One specific way could be to raise the LTV ratio for cars back to 70% as it was previously but only for families with two or more children so as to buttress and incentivise the Government’s efforts to raise TFR.

Mdm Speaker, it would be a tragedy if younger Singaporeans included the inability to purchase a car as a reason for wanting to look abroad for greener pastures, in addition to the visceral insecurity of a more crowded Singapore in the future. It may be helpful for the Government to solicit feedback from Singaporeans about our car ownership policy, going forward, particularly on the aspirations of owning a car even if the stated objective of this policy is to discourage Singaporeans from over leveraging.

This may entail a deeper look into the COE system or even larger national considerations such as the future population size of Singapore so that the policy fear of a more crowded Singapore does not operate to scuttle the aspirations of Singaporeans to own the car of their dreams, unless of course the Government’s intention – be it directly or directly – is to remove the dream of car ownership for middle-class Singaporeans.

On the flip side, I am encouraged by tweaks to the COE policy that give greater business flexibility to SMEs. In January 2013, I asked the Minister for Transport in a Parliamentary Question whether the Ministry will consider reviewing the COE bidding system for goods vehicles and buses to alleviate the costs of doing business for SMEs. While the Minister replied that there were no plans to review the COE system for the said category, he did say that as part of Budget 2013, his Ministry would carefully consider if more help was needed. To this extend, I welcome the flexibility granted to commercial vehicle owners whose vehicles have reached the end of their 10-year COE, as they can now choose to renew their COEs for five years in the first instance and a further five years later.

Likewise the granting of a one-year 30% road tax rebate for goods vehicle, buses and taxis is also welcomed. It would be helpful if the Government could make the extension of such road tax grants permanent, especially for the “mom-and-pop” SMEs with a headcount of five or less when COE prices reach astronomically high levels as they have been in the recent past for Category C COEs. In addition, as some SME owners, particularly hawkers and sundry store owners, work with narrow margins, it may be helpful to look into allowing Cat C COE holders to extend their COEs every 30 months or two and a half years, rather than every five years, as the Budget has announced. Such a move would allow for even greater flexibility for SME owners and nudge them to consider pulling an older vehicle off the road since the decision-making cycle of renewing of COE would be shorter.

Mdm Speaker, post Budget, the Finance Minister acknowledged that the country continues to be in an unhappy part of the property cycle, following up from the Budget Speech that reiterates that the Government will spend more effort resolving the present challenges facing housing and transport. While I look forward to the resolution of these problems, it would be equally important for the Government to explain the reasons behind significant policy shifts instead of leaving Singaporeans to second guess the Government’s real purpose as has been the feedback for MAS’ changes to the car ownership policy. Such engagement will help reduce unpredictability and encourage a more participatory democracy and allow Singaporeans to plan for their future with more certainty.

Written by singapore 2025

06/03/2013 at 9:07 am

Posted in Parliament

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